Driven by the tax changes enacted in last year’s One Big Beautiful Bill, federal individual income tax refunds have been larger for many taxpayers this filing season. In a new insight, Director of Fiscal Policy Jordan Haring walks through the tax changes in effect for tax year 2025 and their effect on taxpayers.

Key points:

• Internal Revenue Service data shows an average refund of $3,462, which is $346 (11 percent) larger than last year’s average amount.
• The One Big Beautiful Bill created or expanded existing tax deductions and credits that reduced taxpayers’ year-end tax liabilities more quickly than withholding systems could adjust,  resulting in a systematic overpayment of federal income tax by most taxpayers during tax year 2025; the overpayments are being returned to taxpayers in the form of higher tax refunds this filing season.
• This year’s higher-than-usual tax refunds are almost certainly an anomaly; they are likely to provide a temporary boost to the economy, as the one-time increase in disposable income is likely to translate into a boost in consumer spending.

Read the analysis.